Due to the pandemic and factors in the price of input materials, the electricity industry did not have the strong growth as planned. However, electricity stocks are becoming the focus as many stocks in this sector made notable gains in the market recently. This reflects investor expectations of high-growth prospects in the long term for power sector businesses.
Vision of Electricity business in the first 9 months of 2021
According to data from The Electricity of Vietnam (EVN), the electricity production of the whole system accumulated in 9 months reached 192.55 billion kWh, an increase of 3.6% over the same period. In particular, the electricity consumption in the Central and Northern regions is still growing very high due to the emergence of heat waves. In contrast, the South has been on a downward trend due to social distancing since July. By the end of September, electricity consumption capacity in the South in the third quarter of this year had decreased by 23% compared to the previous quarter.
In terms of enterprises, in the first 9 months of 2021, the division between electricity sector enterprises is increasingly evident. Some companies that recorded profit even exceeding the plan in the first 6 months of the year but also many fell into losses.
Prominently, PetroVietnam Power Corporation (POW), with the advantage of various power plants, POW recorded revenue of VND 4,687 billion in the third quarter. Accumulated 9 months, POW’s total revenue is also estimated at VND 21,187 billion, equal to 101% of customers in the first 9 months of the year and equal to 95% compared to the same period in 2020.
On the side of hydropower companies, thanks to the favorable hydrology situation, Hua Na Hydropower Joint Stock Company (HNA) recorded revenue in the third quarter of 2021 reached VND 204.5 billion, an increase of about 5% over the same period in 2020. Accumulated in the first 9 months of the year, HNA reached VND 491.5 billion in revenue, completing 99% of the 9-month plan. Central Hydropower Joint Stock Company (CHP) also reported profit in the second quarter with net revenue of VND147.8 billion, an increase of 29.3% over the same period. The rate of low capital expenditure increase resulted in a 67% increase in gross profit from service provision compared to the same period in 2020.
Besides profit reporting companies, there are many businesses that record a decrease in profits. Due to the favorable hydrological situation and the implementation of the Government’s policy on prioritizing the maximum mobilization of renewable energy sources, thermal power plants are forced to give way and reduce mobilization output. Accordingly, Pha Lai Thermal Power Joint Stock Company (PPC) recorded a 38% decrease in electricity output in July and August over the same period. Third-quarter profit is expected to continue to decline due to reduced power generation productivity. Hai Phong Thermal Power SJC (HND) also recorded revenue in the third quarter of VND 2,195 billion, down 4% compared to the same period in 2020. Profit after tax reached just over VND6 billion, a sharp decrease of 96.5%.
Although there is a divergence in business results, in general from the end of September 2021, in the context of the stock market struggle, cash flow towards the field of value investment, the group of power sector stocks became the focus when many stocks in this industry have seen a noticeable increase in recent trading sessions.
Typically, as of October 12, 2021, POW shares recorded an increase of 12.1%, VSH of Vinh Son – Song Hinh Hydropower increased by 12.9%, CHP of Central Hydropower increased by 14.9%; GEG of Gia Lai Electricity and NT2 of Nhon Trach 2 Oil and Gas Power increased by 12.7% and 6.8%, respectively.
According to experts, the rise in electricity stock prices is due to expectations that the electricity sector will recover and grow again in the near future when the economy recovers, the pandemic is controlled and many commodity production facilities are restored production in the fourth quarter of 2021. In addition, there is expectation of a wave of investment shift of international enterprises into Vietnam in the face of uncertainties related to the electricity crisis in China.
The uncertainties are waiting.
According to the Center for Analysis of Petrovietnam Securities Incorporated (PSI), in the short term, hydropower will continue to perform well thanks to the La Nina phenomenon combined with seasonal factors (the second half of the year is the time when the rainy season is concentrated in the Central), the water output is high, making hydropower prioritized to mobilize high output. Meanwhile, due to the deadline for wind power projects to enjoy FIT prices of 31/10/2021, the remaining projects are racing hard to complete and sign COD contracts with EVN ahead of time. PSI assesses the positive outlook for enterprises with power projects that are nearing completion and have signed COD contracts with EVN such as REE, PC1, TV2.
However, renewable energy is characterized by being difficult to store like other traditional sources, causing many difficulties in operating moderation. At the same time, the power system still depends mainly on thermal power (~70% of the electricity production of the whole system), so according to experts, power plants will still maintain the same revenue in the same period thanks to high selling prices and higher output due to the recovery in electricity demand in the fourth quarter. Some stocks are well evaluated by experts such as PetroVietnam Power Nhon Trach 2 JSC (NT2), POW.
At NT2, the cumulative electricity output in 9 months reached 2,369.9 million kWh, corresponding to nearly 60% of the annual plan. Electricity sales revenue also reached more than VND4,460.8 billion, equivalent to 67.1% of the annual plan. It is expected that NT2’s electricity generation will have a chance to recover as electricity demand recovers and after La Nina ends.
Meanwhile, for POW – this is an enterprise with a production and business strategy in line with the development trend of the electricity industry. In the hydroelectric sector, POW’s hydroelectric plants benefit from weather and seasonal factors, so the mobilization output is quite good. In addition, according to the draft Power Plan VIII for the period of 2021-2030, the vision to 2045, clean energy sources such as LNG electricity will be encouraged to develop.
POW welcomed the clean energy trend by promoting investment in projects using imported LNG fuel, typically Nhon Trach 3&4 Power Plant project. With the completion of the loan debt for Nhon Trach 2 project, POW will be able to focus maximum resources on Nhon Trach 3&4 project. At the same time, POW is also promoting investment in other LNG power projects such as Ca Mau 3, Quang Ninh Power Plant… In addition, with the consensus on the plan to adjust Ca Mau 1&2 PPA with EVN, POW is expected to be able to recover debts early and improve the efficiency of production and business activities.
DNTT